Seán Barrett (Dún Laoghaire, Fine Gael)
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Question 17: To ask the Tánaiste and Minister for Finance the cost of not plugging the avoidance scheme on stamp duty; and the reason this was deemed an appropriate policy boost tool for the housing sector. [15645/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Section 110 of the Finance Act 2007 made provision for a charge to stamp duty where license agreements and other such arrangements are used when land is purchased for development without conveyance or transfer. The provision ensured that these arrangements will incur a Stamp Duty charge where a landowner receives a payment amounting to 25% or more of the market value or consideration concerned. Section 110 is subject to a commencement order on the basis that it would be prudent to consider the state of the housing and property market before the provision is put into place.

For this reason, I commissioned an independent study of the potential effects that such a provision may have on the market. The Report is available for download on my Department's website at http://www.finance.gov.ie/documents/publications/reports/2008/S110Report.pdf. As these transactions, under current law, do not involve a liability to Stamp Duty, there is no requirement to present any documentation to the Revenue Commissioners for stamping and there is therefore no specific data on which to accurately estimate any revenue gains from commencing the provisions.

The Report also makes the point that there are no official data sources on the value of development land sales; therefore, it gives an indicative estimate of the total value of the development land market in 2006 at c. €7bn to €8bn. Based on a technical assumption that 40% of land transactions use these arrangements, the Report estimated a potential revenue gain in 2006 of c. €251m if the provisions had been in place at that time. However, this estimate is based on the historic levels of activity in 2006 and is not indicative of the revenue gain that would occur following commencement of the provisions at a later date. A more realistic figure for the revenue accruing from the provisions is in the order of €50m per annum.

It should be noted, however, that the Report recommended that, on balance the section should not be commenced at this time. In this regard, it indicates that Section 110 would have led to a rise in land prices, with a knock-on increase in house prices, especially for first-time buyers, and possibly risked exacerbating the down-turn in the property market. In addition, the Report highlighted that Section 110 would also have raised the cost to the State of PPP projects because of increased land prices. The commencement of Section 110 of the Finance Act 2007 is kept under constant review and any further consideration of this issue has to take into account the prevailing circumstances in the housing and property markets.